capitalflukt

Capitalflukt, or capital flight, is the rapid movement of financial capital out of a country. It occurs when residents, firms, or funds withdraw domestic assets to seek safer or more profitable opportunities abroad, through bank deposits, sales of equities or bonds, or repatriation of profits. Capitalflukt can be formal or informal and may be short-lived or persistent. It is typically driven by expectations about policy, inflation, exchange rates, or geopolitical risk rather than by a single factor.

Common causes include macroeconomic instability (high inflation, large deficits, rising debt), loss of policy credibility, political uncertainty, or external shocks. Financial openness and anticipated currency movements can amplify outflows, as investors rebalance portfolios or seek higher returns elsewhere. Sudden changes in interest rates, risk perceptions, or neighboring crises can trigger rapid reversals of cross-border capital flows.

Effects often include currency depreciation, tighter credit conditions, and reduced investment. Banks can face liquidity pressures, and sovereign borrowing costs may rise. Policy responses vary and can include macro stabilization, credible reform plans, or, as a last resort, capital controls. International organizations monitor capital flows to distinguish destabilizing flight from routine portfolio shifts, acknowledging that capital movements reflect complex global and domestic factors.